Exam 3: Cost Behavior

Below are the overhead costs and labor hours for Smith & Co. Required: Using the high-low method: 1.) Calculate the fixed cost of overhead. 2.) Calculate the variable rate per labor hour. 3.) Construct the cost formula for total overhead cost. 4.) The company is estimating that in September the labor hours will be 600. How much should they estimate to have in total overhead cost for September?

A fixed cost that management can easily decide to increase or decrease is known as a _________________.

Select the appropriate item for each of the definitions listed below. -the y-intercept corresponds to the fixed cost

The controller at Speedy Delivery wants to break-out the cost of deliveries into fixed and variable components so that they will be better able to predict costs for next year. Below are the delivery cost incurred each month and the number of deliveries. Required: Using the high-low method: 1.) Calculate the fixed cost of overhead. 2.) Calculate the variable rate per labor hour. 3.) Construct the cost formula for total overhead cost. 4.) The company is estimating that in January the number of deliveries will be 125. How much should they estimate to have in total delivery costs for January?

__________________ is the general term for describing whether a cost changes when the level of output changes.

Select the appropriate item for each of the definitions listed below. -is a statistical method

Select the appropriate type of fixed cost for each cost listed below. -travel costs

Figure 3-11.The following four months of data were collected on utility cost and the number of labor hours in a factory. -Refer to Figure 3-11. Using the high-low method, compute the variable rate for the utility cost.

As output decreases fixed costs per unit will increase.

Knowing how costs change as output changes is essential to

Figure 3-9.The following cost formula was developed using monthly data for a retail clothing store.Total cost = $75,620 + ($242 * number of customers) -Refer to Figure 3-9. The term $242

The formula for a mixed cost is

Hipcuts Company operates a chain of trendy beauty salons. The company's chief executive officer is interested in accumulating some information on the overhead costs incurred by the company. You have been asked to analyze the following six months worth of data. Overhead No. of Month cost Appointments April \ 60,160 867 May 56,500 624 June 58,900 689 July 63,500 974 August 59,325 730 September 62,400 901 A regression analysis produced the following coefficients. Intercept $\quad$$\quad$$\quad$ 42,900 X Variable 1 $\quad$$\quad$ 20.46 Required:

Advantages of the method of least squares over the high-low method include all of the following except

Figure 3-3.Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected. -Refer to Figure 3-3. What would Okafor Company's cost formula be to estimate the cost of leasing within the relevant range?

$8.83 * independent variable

Why would cost behavior change outside of the relevant range?

Figure 3-7.Margola Company produces hand-held calculators. The company controller wanted to calculate the fixed and variable costs associated with the maintenance cost incurred by the factory. Data for the past four months were collected. Coefficients shown by a regression program are: -Refer to Figure 3-7. Using the results of regression, calculate the fixed cost of maintenance.

Select the appropriate cost behavior for the following costs incurred by an automobile manufacturer. -cost of assembly line workers

Select the appropriate cost behavior for each of the costs listed below. -factory supplies